Recently, I wrote the “The World’s Shortest Guide On How To Be Thin and Rich“. Here’s the how-to-be-rich part, in it’s entirety:
- Spend less money than you earn (or to put it another way, make more money than you spend)
- Invest in your future
That’s it! Truly, this is all it takes to achieve financial freedom.
Since the principles are certainly very short and sweet, the devil must be in the details. So today, let’s take a closer look at the first step. Within step #1 above (spend less money than you earn / make more money than you spend), you have three choices:
a) Spend less money. Fortunately in today’s economic climate, decadence is passe and frugality is the new cool. Still, I find that most people I talk to through my coach business are deeply in debt because they are living an unsustainable lifestyle. Those with a negative net worth often drive new(er) cars and live in big houses. If you are serious about spending less money, recognize that housing, cars and taxes dominate most budgets. Rather than focusing on the small stuff like your cable bill and Starbucks treats, make dramatic cuts to your big budget busters first. Sell your late-model car and replace it with a less expensive used one. Now take your newly found cash — plus the monthly savings from eliminating or reducing your car payments — and throw it at your debt. If you are debt-free, throw it at your retirement and savings accounts instead. Do the same with your other big ticket items, including your house. Once you’ve tackled the biggies, you can whittle away at the little stuff (cable, Starbucks, etc).
~ OR ~
b) Make more money. Within this option you have two basic choices: work more, or get paid more for the work you already do. Personally, I prefer to get paid more for the work I’m already doing. Ask for a raise or a promotion; cut out the middleman (your employer) and work for yourself; increase your rates; hire subcontractors and delegate extra work for a share of the profits.
~ OR ~
c) Do both.
Which option do YOU prefer?